Subjective wellbeing and income: empirical patterns in the rural developing world

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Subjective wellbeing and income: empirical patterns in the rural developing world

A commonality in the economics of happiness literature is that absolute income matters more for the subjective wellbeing of people at low income levels. In this article, we use a large sample of people in rural areas of developing countries with relatively low income levels to test whether subjective wellbeing an increasing function of absolute income in our sample, and to analyze the existence of adaptation and social comparison effects on subjective wellbeing. Our sample includes 6,973 rural households in 23 countries throughout Asia, Africa, and Latin America. The average total income per adult equivalent in our sample was US$ 1555, whereas levels of subjective wellbeing resembled levels found in previous research using cross-country data. We find that, despite low levels of absolute income, levels of subjective wellbeing of our respondents resemble levels found in previous research using cross-country data. We also find remarkable similarities in many of the determinants of subjective wellbeing previously tested. Our data show that absolute income covariates with subjective wellbeing, butas for richer samplesthe magnitude of the association is lower once we control for adaptation and social comparison. Finally, our results suggest that social comparison has a stronger effect than adaptation in explaining the subjective wellbeing of our sample. Our findings highlight the importance of adaptation and social comparison even at low levels of absolute income.